Mining, oilsands developers open floodgates of capital

EDMONTON - The roots for a solid resurgence in oilsands construction are clear from the estimated $16 billion in capital spending plans announced by some of the big players this year, up from $13.5 billion in 2010.

And according to Alberta’s 2011 energy outlook, non-mining projects will make up a growing component of overall spending.

The SAGD (steam-assisted gravity drainage) in situ projects require a long-term oil price of about $50 a barrel to be economic, less than the $60-plus level for new large oilsands mining projects.

Edmonton area fabrication plants and other service industries provide the lion’s share of products and skilled workers for the oilsands.

Some of the highlights include:

— Canadian Natural Resources is budgeting $2.5 billion, about $1.35 billion for thermal in situ, and another $800 million to $1.2 billion for expansion work at the Horizon mine and upgrader project.

— Suncor Energy intends to spend $4.18 billion this year, up from $3.21 billion in 2010. It is also moving forward on its Fort Hills mine project after a joint venture deal with Total E&P, which will spend $314 million this year for its share of work at Fort Hills and the resumption of construction of the Voyageur upgrader, Suncor’s half-finished project halted in 2008 when oil prices tanked. Suncor continues to add to its Firebag in situ project, and has begun work on the MacKay River 2 project.

— Cenovus Energy could spend up to $1 billion this year with capital expenditures of $350 million to $400 million each at its Forster Creek and Christina Lake SAGD projects. Cenovus has also allocated up to $200 million for its emerging oilsands assets such as Narrow Lake, Grand Rapids and Telephone Lake.

— Canadian Oil Sands Trust, which has the largest ownership share in Syncrude, will spend $907 million this year, up from last year’s capital spending of $511 million. Syncrude’s total estimated budget for this year is $2.8 billion to expand operations.

— Nexen Energy has budgeted a total of $575 million, of which $425 million has been allocated for Long Lake and other in situ projects, with a further $150 million for its share of Syncrude expenditures.

— BP Energy will spend $416 million this year as its share of the first $2.5 billion of Husky Energy Inc.’s Sunrise oilsands mining project.

— At Christina Lake, MEG Energy plans to invest about $900 million in 2011, when it starts facilities construction for the second phase of its $1.4-billion SAGD project.

The $5-billion North West Upgrading plant will produce diesel and other products using gasifier technology, a first in the province.

Alberta has five operating upgraders with the capacity to handle about 1.2 million barrels per day of raw bitumen, turning it into high-value synthetic crude and other products such as diesel.

In 2009, about 60 per cent of all oilsands production was upgraded within the province.

Alberta’s three refineries, with a combined crude processing capacity of 430,000 bpd, process blends of oilsands and conventional crudes.

Petroleum and natural gas land sale revenues are soaring, with $902 million collected so far this year, on track to better last year’s record of $2.39 billion. And that surpassed the previous calendar year record of $1.83 billion set in 2005.

The average price collected so far this year is $694 per hectare for land rights. In 2010 it was $619.68 per hectare, while in 2009, the average was only $420.41 per hectare.

While higher energy prices generally help raise the cash Alberta earns for its resources, a rising loonie can have the opposite effect.

Every $1 increase in the price of oil is worth $141 million to the province. But according to Alberta Finance, the province also loses $154 million for every one-cent increase in the Canadian dollar.

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